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Romania structural funds for the ICT sector

Romania is one of the fastest growing IT markets in the CEE region. Despite a slight slowdown due to the global economic situation, around 1mil PC units were sold in 2008, an increase of about 25% in volume terms then 2007. In 2008, total IT market growth is likely to be about 12% in dollar value, slightly below last year's level. Overall PC penetration is around 22%, and the market remains underdeveloped by most indicators, representing consumer growth potential as incomes rise.

The IT market should increase to around US$2.4bn by 2012. The macroeconomic fundamentals are generally upportive. Increased competition and privatizations provide opportunities for IT vendors in many economic ectors, particularly financial services, banking and telecoms. Business spending as a result of EU entry will be a boost to investments in enterprise resource planning (ERP) applications, although this could be hit by a downturn in the Euro zone. AXIS 3: ICT for public and private sector - see also under the SME section of this website. Here are some topics that are covered with structural funds for ICT in Romania.

ICT sector development

Even if Romania has one of the highest dynamics of ICT sector at regional level, the total IT expenditure as percentage of GDP is almost 2/3 from the EU25 average (3%) and PC availability and broadband Internet penetration still lag well behind the EU25 average.

From this perspective, IT investments are required in order to facilitate the development of a true knowledge-based society, especially for spreading of IT equipment, services and software applications. It is extremely important to increase investments in the ICT field and to reduce the gaps between the actual expenditure level and the desired development level.

Access to information and communications technologies

Despite the considerable progress scored by Romania in developing ICT, the information technology infrastructure and use still remains far from the level of older EU member states. Romania lags behind in terms of computer penetration and electronic communications infrastructure access, not only compared to EU-25, but also to the new Member States average. Computer penetration is much lower than the EU 25 levels (24 PCs/100 households at the end of 2005 compared with approximately 58 PCs /100 households, even though the average sales growth was more than 31% in 2005 compared to 2004 (European Information Technology Observatory 2006). This has a negative impact on national competitiveness, as computer usage and Internet access are important factors for economic development.

Electronic communications market liberalization has triggered an increase in the number of electronic communications networks and service providers operating on the market. The Romanian telecommunication market was fully liberalized in 2003 and as a result, the regulatory environment has changed significantly since then. Currently, the telecom market is split in the following segments: 61.7% mobile telephony, 33.5% fixed telephony, and 4.8% Internet and other data transmission services.

Many of the underdeveloped areas do not have the basic infrastructure to ensure Internet access and, in some cases, they do not even have access to fixed telephony. Romania has a policy for establishing telecentres for community's access to telephony and Internet services as an interim solution before fixed telephony can be generally available to households.

Those significant infrastructure gaps are remediable only through major investments, both from private companies and from public institutions.

ICT services and applications

The IT society development was marked in 2001 by the settlement of the legal framework for supporting the development of e-government and e-business applications. However, there has been a lack of investment by the public authorities in e-government, e-health and other similar services.

E-government

There is a growing consensus that e-government is now becoming a key factor for increasing competitiveness.

The multiplier and leveraging effect of the public sector on overall productivity and competitiveness is even increased by the use of ICT, which has become the main driver of productivity growth.

E-Learning

A competitive knowledge society needs mobility, flexibility and adaptability with regard to skills of its citizens. E-Learning is an efficient and cost effective tool for fostering workforce development that can lead to cost savings through better usage of a user's time, efficiency in personnel resources in institutions providing education and training. In this sense, e-Learning is becoming the underlying enabler of a knowledge society and a key lever for competitiveness.

E-health

Integration of modern information and communication technologies in the health system or e- Health is the key to optimize the processes within the entire healthcare system and to provide higher quality at less cost. This will offer important opportunities for improved access to better health systems which include tools for health authorities and professionals as well as for patients and citizens.

E-business

E-business does not only mean on-line commerce, but also electronic purchasing and supply chain management, processing orders electronically, handling customer service, and cooperating with business partners. It is, therefore, important to support SMEs to adapt to the structural changes enforced by new technologies.

Electronic commerce is still underdeveloped, but growing. In 2004, the share of e-commerce in the overall turnover was 1.3% in Romania compared to 2.1% in the EU25. The banks and card processors reported an increased number of transactions in 2005: 368,352 transactions cumulating over 45.6 mil Euro, with growth rates above 150% annually.

Expenditure for integrated applications has a major impact on the entire activity of an enterprise. Because of the high cost of integrated software solutions for corporations, the number of those who are using this type of applications is reduced. The level of new technologies uptake does not refer only to connectivity (even if this is the key element), but also to the capacity of the population and the business environment to use efficiently these technologies and to the way the Government encourages the use of digital technologies.

In order to reduce the gap between Romania and the EU average, it is necessary to invest in broadband infrastructure and content development.

Regional disparities

In the last years, Romania has faced the problem of growing inter-regional and intra-regional gaps. The most significant disparity is between Bucharest-Ilfov and the other regions. In Romania, at the end of 2004 there were 9,281 IT companies, compared to 8,438 in 2003 and 3,639 in 1999; 70 to 75% of the total turnover was concentrated in Bucharest.

As a result of the low socio-economic integration and weakness of ICT infrastructure, the existing opportunities in the Bucharest region were not extended to the adjacent areas. The same complies with respect to the urban and rural areas.

In Romania, the incidence of ICT has not been evenly spread across the country, leading to significant digital gaps between urban and rural areas. The ICT network rollout is particularly difficult because Romania is a large country with great geographical diversity and many small, unevenly distributed rural communities.

Presently, rural areas are confronted with a handicap from the point of view of copper infrastructure, coaxial cable and optic fibre compared to urban areas, so that (potential) suppliers of broadband services have not ractically a platform from which investments can be initiated for the development of offers in rural areas.

Therefore, in the market failure areas - under-served rural and small urban communities (with extremely low broad band network coverage or with no coverage at all) the development of broadband communications can support economic and social integration by facilitating the access to new and better goods and services, as well as opportunities to participate in digital economy or information society.